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Innovation, Governance and the Institutional Environment

Edited by Birgitte Andersen

Intellectual Property Rights is cutting edge in addressing current debates affecting businesses, industry sectors and society today, and in focusing not only on the enabling welfare effects of IPR systems, but also on some of the possible adverse effects of IPR systems.

Chapter 5: Why do Small High-Tech Firms Take Out Patents, and Why Not?

Monograph Chapter

Extract

5. Why do small high-tech firms take out patents, and why not? Lee N. Davis ABSTRACT This chapter seeks to add to our understanding of the strategic and economic effects of patents by exploring why small ﬁrms take out patents, and why not, and how these choices are linked to their broader business and technology strategies. To this end, we interviewed patent experts in thirty-four small Danish ﬁrms in telecommunications, software and biotechnology. The major reasons to take out patents, we determined, were to protect against imitation and to signal strategic intent. The major reasons not to patent were that the invention was not patentable, and the high costs of detecting infringements. Generally speaking, biotech ﬁrms found patents essential to create value, software ﬁrms often found patents irrelevant, and telecommunications ﬁrms found them important, but in combination with other factors. Much depended on the type of innovation, and previous experiences with patents. Many respondents had developed ﬁne-tuned, ‘contextual’ patent strategies, focusing patent resources in areas important to them. Keywords: Patent motivations, Small ﬁrms, Biotechnology, Software, Telecommunications 1 INTRODUCTION While there is an extensive literature on the beneﬁts and costs of patenting for innovating ﬁrms, including empirical surveys (for example, Cohen et al., 2000, Levin et al., 1987), and accounts of the strategic use of patents (for example, Grindley and Teece, 1997, Rivette and Kline, 2000a,b), the analytical focus is typically large ﬁrms (principally US ﬁrms) from a variety of industries. Few scholars explore the patent strategies of small...

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